Everything is going up...
Trip Start
Jun 03, 2006
1
120
131
Trip End
Ongoing
Shenzhen,
China
Thursday, November 29, 2007
Whatever the official statistics and pronouncements by analysts, inflation is becoming a major issue for the lower and middle classes in the south of China. Forget official numbers of 6 to 9%. The anecdotal, on the street evidence is that the price of basic foods have gone up anywhere between 15 and 40%. If that sounds like an over statement, consider that a bowl of noodles that was 3 rmb last autumn is now 4 rmb, or bar of chocolate which was 3.5 rmb last year is now 4.5 rmb. A basic rice, meat and vegetable meal in our local café now costs at least 25 rmb if the two of us eat there together, when last year we'd have paid 20. Restaurant menus are frequently out of date because they can't reprint them fast enough to keep pace with the price increases!
There are stories about companies moving out of the Pearl River Delta in search of lower cost environments to the north and west. Business is still good here, but the boom times may have been and gone. The central government's overdue tightening of the money supply will certainly start to bite on businesses, and the loosening of the yuan-dollar exchange rate will also take a toll on exporters except those well enough connected to obtain government sponsorship for hedging currency risks through forward contracts. Ironically, the consumer society which has been spawned is probably just about ready to start importing inflation. The tantalising opportunities offered by the loosening of the exchange rate are a conundrum for the less wealthy who aspire to live comfortable middle class lives consuming international goods.
At some point, inflation is an issue for most developing economies, as well as for many advanced ones. Personally, it's always been something on the inside pages of a newspaper until now. Here, I can see it everyday, and the natives are starting to get a little restless. At the moment, these are just gentle murmurings, but the economic migrants who head south and east from the interior cannot sustain their dreams of sending money home to build new houses if the inflation eats at their day to day lives. Those individuals will have to make some tough choices, and maybe the rarely spoken resentment towards those who inhabit the gleaming towers of downtown Shenzhen and Shanghai will be more than just a gentle murmur. It is a scant reminder of the tightrope the Powers that Be walk in modern China. Quite literally, everything depends on sustained economic success and stability. There are no safety nets for anyone in this society.
